Efforts by financial institutions to help people by advancing federal Economic Impact Payments seem to have backfired, resulting in overdraft fees and other problems, the Consumer Financial Protection Bureau reported in its latest bulletin on problems faced by consumers during the pandemic.
On March 9, 2020, the financial regulatory agencies issued a statement encouraging financial institutions to help consumers in areas affected by COVID-19, the agency said. The CFPB said that as a courtesy to consumers who had overdrawn accounts, some financial institutions advanced an amount equal to the negative balance so consumers could take full advantage of the EIP.
These advances were later reversed—typically 30 days after the advance.
“Consumers described these reversals as problematic for several reasons,” the CFPB reported. “Among the most concerning is consumers being surprised by the reversal, which—at least for some consumers—resulted in overdraft fees for multiple items that posted to their now overdrawn account.”
The agency said that some consumers reported that they were more overdrawn after the advance was reversed than they were before the stimulus payment was deposited.
The agency did not provide details about whether credit unions were included in the institutions that caused the confusion.